New Earned Income Credit Filing Requirements for the 2011 Tax Year

The IRS announced that they will be continuing their “Knock and Talk” EIC preparer education program, along with sending compliance letters, initiating preparer due dilligence audits, and requiring additional information be attached to all returns claiming EITC.  Prepareres will not notice much differece in the preparation process as now the tax preparation software will submit the EITC checklist (form 8867) along with the rest of the e-filed tax forms.  

This October the IRS will be sending letters and paying visits to tax offices that have been identified as high risk.  The IRS uses a scoring system to classify EITC return preparers and to determine their actions against these preparers.   High risk preparers can expect one of the following 3 IRS actions on their tax offices:

• Educational/Soft Compliance Letter
  Starting this month, the IRS will begin mailing 3,000 educational/compliance letters to new, low, and medium-risk preparers. The intent of this letter is to:
  • Educate the preparer on what the requirements are in the areas where the IRS has seen the most errors on EITC returns.
  • Educate the preparer on what their due diligence requirements are and the consequences of not complying with these requirements.
  • Notify the preparer that the IRS will continue to review all EITC returns that they prepare.

• Knock and Talk Visit
  Beginning in December, the IRS will conduct approximately 100 educational visits to preparers who have been identified as filing highly questionable EITC claims.

  The objective of these visits is to ensure that the preparer understands the type of errors that the IRS has identified on their returns and to improve the accuracy of their future EITC claims.

  No penalties or interest are assessed because of these visits; however, the IRS will be closely monitoring returns filed by these preparers during the upcoming filing season. If the IRS does not see an improvement, a due diligence audit will be performed.

• Due Diligence Audits
  The IRS will again be conducting approximately 1,000 due diligence audits over the next year. The first of these audits will begin this month (October 2011).

  The IRS conducts a due diligence audit on a preparer whom they consider to be filing a large number of highly questionable 2010 EITC claims.